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State Cigarette Minimum Price Laws—United States, 2009

April 9, 2010 / Vol. 59 / No. 13

MMWR Highlights

Background

Increasing the price of cigarettes leads to substantial reduction in smoking by preventing initiation among youth and young adults, prompting quit attempts, and reducing average cigarette consumption among those who continue to smoke.

To counteract the price effect of excise tax increases and to appeal to price-sensitive smokers, cigarette manufacturers use discounts, coupons, and other promotions to reduce the retail price of cigarettes.

Minimum price laws can help preserve the effect excise tax increases have on cigarette prices and can help counteract cigarette price manipulations by cigarette manufacturers.

State minimum price laws set a "floor price" and prohibit cigarettes from being sold below a minimum amount set by state statute.

Although excise tax increases are the most direct way to increase the price of cigarettes, minimum price laws may be a secondary strategy states can consider when attempting to raise cigarette prices and/or maximize the effect minimum price laws have on tax increases.

These laws can meaningfully raise the price of cigarettes in states with low cigarette excise tax rates, thereby reducing the number of youths who take up smoking, reducing the number of cigarettes that adults smoke, and encouraging current smokers to try quitting.

Cigarette minimum price laws were developed to protect independent tobacco retailers from the predatory business practices of large retailers. Although not intended to promote public health goals, these laws are an effective policy tool that can support the beneficial health impacts of higher cigarette prices.

State Cigarette Minimum Price Laws

As of December 31, 2009, 24 states and the Distract of Columbia had a statutory minimum price for cigarettes.

The minimum percentage by which states require a markup on the wholesale price of cigarettes ranges from 2% in 2 states (Louisiana and Mississippi) and the District of Columbia, to 6.5% in Connecticut.

The minimum percentage by which state required a markup on the retail price of cigarettes ranges from 6% in 6 states (Alaska, Louisiana, Mississippi, Oklahoma, Pennsylvania, and Wisconsin) to 25% in Massachusetts.

The median retail percentage markup among the states is 8%. The minimum price laws in Washington and Rhode Island do not require a percent markup for either wholesale or retail; instead, the state statutes set the minimum price as the "actual price paid" and "replacement cost" in these states, respectively.

Minimum cigarette price laws vary widely among states. Currently, of the states with the 10 lowest state excise taxes, only 1 state (Louisiana) has a minimum price law. Of the 10 states with the highest excise taxes, all but 2 (Hawaii and Vermont) have a minimum price law.

More research is needed on how minimum price laws directly impact cigarette prices, impact state tobacco-related revenue, could impact excise tax avoidance, and could be designed to ensure that they are not undermined by remote sales (e.g., Internet and mail order sales) or by direct sales for manufacturers to consumers.